If a loan was made two years ago with a security agreement listing Inv/Accts & a UCC was filed and now we give the same customer a new loan cross-collateralized with the same collateral, do we need to prepare a new security agreement for the new loan or can we describe the older secuirty agreement in our new promissory note, use the same UCC and not worry about preparing a new security agreement? Both loans are still active but if the first loan pays off is it okay to keep the old security agreement and place it with the new loan? Thanks!

I've always referenced my the original ucc/sec. agrmnt on the new loan.

Thanks ~Special K~. Do you still produce a new security agreement or do you just reference the original security agreement?

Sorry, forgot to answer that part of the question. Yes we always do a new security agreement. I'm not sure if it was required but we do more as a C.Y.A. if ya know what I mean.

And when the original loan pays off, do you keep the original security agreement and place it with the newer loan because it is referenced or do you pull it from the file completely? Thanks again!

I'd pull it from the file because you're only going to need the referenced UCC.

Thanks for taking the time to respond. Have a great day!

If you are using your security agreement to justify the filing, you need to keep the security agreement.

If there is a "future advance" clause in the old security agreement, there is no need to obtain a new one. It also may help in a priority fight, because priority can be affected by the terms of the security agreement.

Thanks Tom.

I believe that the security agreement needs to be kept if you will be keeping the UCC. The security agreement is your perfection, the UCC filing is the notice. If the security agreement does Not have a "future advance" clause, the question would be, does it then have a "cross-collateralization" clause? Those generally state that the s/a is "also given to secure any and every other obligation or liability direct or indirect (including overdraft) of Debtor to Secured Party and claims of every nature and description of Security Party against Debtor now and hereafter existing." Would this, then, be effective as a "future advance"?

The security agreement is required for a security interest to attach, which is required to have a perfected security interest. The filing perfects the attached security interest.

Most lenders use the security agreement to authorize the filing. It is not the only nor the best thing to use, but it is the most common authenticated record used to authorize the filing.

I have never seen a security agreement that does not include not only a "dragnet" clause but also a future advance clause. That does not mean that such does not exist, only that I have never seen one.